Chapter 7 – “Fresh Start”

First, you must determine whether you pass the “means test,” and therefore qualify for a Chapter 7 Bankruptcy. If it is determined that you qualify, then a full evaluation of all your present assets must occur. If you do not pass the means test, then you may want to consider filing a Chapter 13 to ensure you are protected. To find out if you qualify, please visit our Bankruptcy Qualification Determination page.

In a chapter 7, or “fresh start,” the bankruptcy court appoints a trustee to look over the debtor’s assets and determine whether they are exempt or nonexempt property. Debtors are given exemptions to cover equity in their residence, motor vehicle, investments, household goods, life insurance, health aids, specified future earnings such as social security benefits and alimony, and certain other personal property. If there are not enough exemptions to cover all assets owned by the debtor, then the case will be deemed an “asset case” and the trustee may then sell the nonexempt property and distribute the proceeds among the unsecured creditors. Fortunately, the vast majority of cases are “non-asset” cases and therefore the debtor keeps ALL their property.

With a “fresh start,” the debtor will be discharged from the legal obligation to pay unsecured debts such as credit card debts, medical bills, cash-advances and utility arrears. However, certain types of unsecured debt are allowed special treatment and cannot be discharged. These include student loans, alimony, child support, criminal fines, and some taxes. However, we do offer a service for tax obligations called Offer In Compromise, where we can assist you with settling those debts owed to the IRS.

An important feature applicable to all types of bankruptcy filings is the automatic stay. The automatic stay means that the mere request for bankruptcy protection automatically “stays” or forces an abrupt halt to repossessions, foreclosures, evictions, garnishments, attachments, utility shutoffs, and debt collection harassment. It offers debtors an opportunity to catch their breath by giving the debtor and the trustee assigned to the case time to review the situation and develop an appropriate plan. Creditors cannot take any further action against the debtor or the property without permission from the bankruptcy court.